Cablevision Sues Viacom Over Channel Package Deal

Says Packaging Must-Have With 'Don’t Want' Channels Violates Antitrust
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Cablevision Systems has taken legal aim at channel package deals.

The cable operator has filed an antitrust suit against Viacom in a Manhattan federal court for what it says is the programmers illegal forcing of the cable operators to carry 14 "lesser-watched" channels.

Viacom countered that Cablevision was just trying to renegotiate a two-month-old contract via the courts.

Cablevision says that its customers do not want networks such as Palladia, MTV Hits and VH1 Classic, but that it is forced to carry them in order to secure must-have nets like Nickelodeon, MTV and Comedy Central.

Cablevision wants a December 2012 carriage deal voided, "a permanent injunction barring Viacom from conditioning carriage of any or all of its Core networks on Cablevision’s licensing any or all of Viacom’s ancillary networks," as well as treble damages and legal fees.

“Viacom's conduct harms Cablevision and its customers, and impairs competition by making Cablevision pay for and carry networks that many subscribers do not want to watch, while other networks are excluded from distribution, preventing Cablevision from being able to differentiate its services and harming subscribers,” Cablevision said in filing the suit.

Cablevision identifies the "core" networks as MTV, MTV2, Nickelodeon, VH1, Spike, TV Land, Comedy Central, and BET.

Viacom defended the policy, suggesting they were helping out cable operators and other distributors. “At the request of distributors, Viacom and other programmers have long offered discounts to those who agree to provide additional network distribution," the company said in a statement. "Many distributors take advantage of these win-win and pro-consumer arrangements.  Reflecting the highly competitive cable programming business, these arrangements have been upheld by a number of federal courts and on appeal.  Viacom will vigorously defend this transparent attempt by Cablevision to use the courts to renegotiate our existing two month old agreement.”

Other cable operators were standing by Cablevision, using the suit to make their own points about the need for a closer look at program prices.

"We applaud Cablevision’s efforts to rein in programming costs," said Charter in a statement. "These costs continue to increase at rates that exceed the pace of inflation at a time of significant economic turmoil.  If programmers force us to purchase less desirable programming in order to secure “must have” programming, programmers can unreasonably increase costs significantly for us and our customers while blocking other market participants and new entrants.  We believe lawsuits like the one brought by Cablevision today send a clear message to programmers that unlawful and irresponsible market tactics will not be tolerated. 

“We frequently have pointed out that there are serious problems with the current programming environment," said Time Warner Cable in a statement on the suit. "We think this lawsuit raises important issues, and we look forward to their resolution in the courts.”

American Cable Associaton (ACA) President Matt Polka has been a strong critic of program packaging.

“[ACA] has been consistent in saying that the tying and bundling practices of the major cable content companies force cable operators to pay for channels they don't want to offer to their customers," he said in a statement. "It's a problem not just for Cablevision but also for hundreds of small and medium-sized cable operators. If the courts can address this problem, then we believe this would be a good outcome for consumers."

Smaller independent networks were also understadably pleased with the development.

"We are very supportive of Cablevision's efforts to try to get some changes so there is a more level playing field in the wholesale market, said Chad Gustein, COO of Ovation, an independent net that has long complained about the packaging issue and its impact on carriage of nets like itself.

“The aggressive stance taken by large media conglomerates leaves less room and money to go around for independent, vibrant programmers that serve smaller, but passionate audiences that love and want the family-friendly programming offered on GMC and Aspire," said Brad Siegel, Vice Chairman, in a statement. "We have raised this issue to Washington D.C. lawmakers for years; however it is one that continues to plague independent programmers. This is another concrete example of how this problem that has not been addressed continues to play out, ultimately hurting the consumer.”